stacey that's basically the global economy the global financial system of course now this guy new hampshire man loses his life savings on carnival game is he was henry gribbohm and he lost his life savings of twenty six hundred dollars on this game where i guess you had to put this ball into a hole and he wanted to win a bigger prize but what he found is that when he practiced he says it was easy but something changed when he started playing for the prize and the balls kept popping out it's not possible that it wasn't rigged said graham if you were observing the situation if you were in a situation where you saw it was rigged. go away or would you say hey i'm going to try to win my money back that i've just lost right well this is part of economics and behavioral economics and what wall street and other brokers and bankers prey on is on the fallibility of the human psyche that is prone to emotionally get involved in a situation where they're losing money in

a rigged market and they are blinded to the rigging they only have an emotional reaction that they want to get their money back so they're willing to double down on a rig market this is what people like goldman sachs j.p. morgan are doing your bank in germany this is how they make their money they're very sophisticated casinos in this way they know that the punters the people who come in who are losing their life savings are behaviorally drawn toward this kind of suicide mentality they see the mobs flying into the light and killing themselves that's the business model of wall street so in this case here the thirty year old from epson says he kept trying to win back his money by going double or nothing he dropped three hundred dollars in just a few minutes then says he went home to get twenty three hundred dollars more and soon lost all of that as well you just get caught up in the whole thing he said i've got to win my money back so you know here we have after a financial collapse

a lot of people have lost their homes for through foreclosure or negative equity they've lost all of their four one k. pension funds money down in the stock market so they're doubling down trying to make that money back and we see that all across the world everybody is diving into the stock market we see housing bubble again emerging in the united states because people want to win back the money even though they know it's now a rigged system well let me reintroduce a concept i've talked about on this show before which is the martin gail betting system the martin betting system if you go to the casino you're at the roulette wheel you bet on red. and if you lose you double your bet and you bet on red again and you continue doing this until eventually you will win and you will win win a bunch of money but typically more people don't do this because you run out of money a lot quicker than the odds are that you're going to hit the right number and get the money back wall street have been able to legislate and to re shape the way

finance is conducted around the world to allow them to engage in martin gayle betting system again a j.p. morgan or goldman sachs they're constantly doubling down on losing bets because they know because their source of credit is the federal reserve bank it's the american taxpayer and recently as to global taxpayer in the global banking system they have an infinite supply of credit at virtually zero percent interest rates they are engaged in the martin betting system and they never lose whereas this poor guy the but now nick man with the dreadlocks he encounters the shortcomings of the martin betting system which is that he can only do one or two throws of the dice then he's bust he is bankrupt he goes home completely without any money if you were working at j.p. morgan you continued to do this exact same bet using the house money using our money using the the federal reserve the central bank's money until they made a profit that's the cute difference between the insiders who are raping the system and everybody else well we can point to two real world examples of this long term

capital management that's when the fed first got involved in manipulating global interest rates in order to bail out one person they went bust on martin gal betting technique of doubling down on the russian ruble they lost the bet over and over and over until they couldn't sustain the bet anymore the same thing happened with m.f. global junk or assigned bet on the euro bonds and he doubled down doubled down doubled down eventually at the bet went right but too late for him now but those are when the odds are it's not totally reject that their odds are that eventually you might win here in the markets now there is no chance of you winning the odds are that you will. whose on every single thing just like with this guy with the banana man he was never going to win there is he could have doubled down for eternity he would not win because the game was rigged high speed traders exploit loophole high speed traders are using a hidden facet of the chicago mercantile exchange as computer system to trade on the direction of the futures market before other investors get the same information

using powerful computers high speed traders are trying to profit from their ability to detect when their own trades for certain commodities are executed a fraction of a second before the rest of the market sees the data traders say so it's only giving them up to a ten milliseconds advantage but that's enough for them to guarantee profits right it's not enough that they're able to engage on this martin betting system of guaranteed profits using the central bank's balance sheet as your own they want more they want to be able to front run as well as engage in this massive fraud on them aren't betting system story that we're just talking about today they're not satisfied with that this is why the wealth and income gap in the u.s. and around the world is growing so so much is because so much of the billions and hundred billion dollars per day of training that goes on is simply another stolen or front run and of course not just drains the system of capital that would be used to create jobs create more balance in the economy and you'd have a less of a risk now of social cohesion and risk as the economist magazine calls it

a revolution so according to this article sixty one percent of all trading on the u.s. stock exchanges is by high frequency traders so these guys can trade in a fraction of a millisecond they're just able to go in there way before you front run a trade that you're even thinking of now and people keep on getting into the markets though they see the balls popping up out of the hole they know it's rigged and they keep on getting it in for some reason officials with virtue financial high speed trading firm in new york the u.s. like head start is good for the overall market according to a person familiar with their thinking the person said the data helps traders. who buy and sell futures contracts throughout the day manage risk in post more quotes that benefit other buyers and sellers the person said virtue doesn't use that information to apple fire its profits by anticipating moves elsewhere in the market well this is again a return to the neo feudalism model they're using the are going to the divine right of kings that their profits are better god be legally by exploiting loopholes and

by stealing they deserve it because they consider themselves to be what are some call market fundamentalisms they are the jihadi use of market they are the they are the suicide bombers of chicago in new york they're exactly equivalent to a suicide bomber in a cafe in the middle east then you have a suicide bomber in chicago or new york there's a cut from the same cloth they believe in the sanctity of their own narcissism as the guiding light of their actions and they're killing themselves and others and that's why we have a big problem so again you know the market making and liquidity are the excuses they use over and over we played that a few years ago where blankfein of goldman sachs was interviewed by charlie rose he said there are market makers they're just providing liquidity to the market all these fraudulent c.d.o. is that was just market liquidity they had no position blith master she was now under investigation for rigging energy markets she just said the same thing about silver a few years ago i can see the parking. lot and i

can see if you prefer not to be. pissed off it's not. going to be able to get you to. a particular tree except. it would. be. if you. think. that i'm pretty. but i think that on what's the update there your thoughts well i think it's going to make any maiden meaningful difference to the to the european economy i mean we had this policy internationally now forward five years of interest rate repression you know financial repression keeping interest rates artificially low this policy is supposed to kick start the economy to you know just give impetus to it it's evidently not working i mean the policy is

a failure in fact i think it's all counterproductive because will be seeing as we blow in you bubbles in financial markets and in the main response you get is in financial assets. at these kind of interest rates it's obviously cheaper for banks to to run big books and you know financial assets we saw after the announcement of german government bonds booms making new all time highs. a lot of that a little bit of that may ultimately trickle down into the real economy but but this is. the policy does doesn't work let's talk about this phrase financial repression for a second so in other words you have these rates of half a percent but the nominal rate of inflation even even when the number that's being reported by the government which is understating the number of adults take their their number of roughly two and a half three percent when when rates are underneath that level that opens up this idea of repression doesn't because people's people are especially also you have

a situation where wage growth is only maybe one percent a year so wages are in the savings rates are materially underneath even this low nominal rate of inflation so right there out of the box people are losing losing their purchasing power and they're being repressed you could say and that's kind of where the genesis of the term comes from a way can you elaborate on that some more well first of all of think it simply means that central banks doing everything they can to not allow the market to set interest rates and respond i mean it's fair to say that i think many of these assets. yields on these as it's a lower than that would be if we had not this financial policy from the central banks and i think many risk premiums on financial assets in corporate bonds or on equities would be higher if we didn't have that policy so the idea is to step as prices and yields that are not set by the market but by central bankers. this should encourage people to spend and to you know

a borel and invest. but i think that i think the problems we simply have after the crisis a lot of people feel they have too much on corporations feel they have too much debt and individuals feel they have too much debt people went through a boom bust cycle already so i think it's also datable that people don't want to take up the cheap money and do the same thing again all the central bankers do everything in their power to encourage them to do just that you know the me just pick up those two ways to grow an economy you can borrow to invest or you can spend money into capital expenditure and you could save money in terms of developing a savings rate and this idea where we're not going to have capital expenditures are going to rely on consumer culture seventy percent of the economy here is consumer culture it's going to be funded by people borrowing money. and it's resulting in as we're saying asset bubbles and now stocks and and real estate but no genuine growth in terms of the underlying economy the participation rate of labor for example united states is still at. the low we have to go back to nine hundred seventy s.

defined as low as it is now wages are barely moving at all the fabric of the economy still falling apart because there's a choice the choices for borrowing to speculate instead of investing essentially and capital creation so that that's a that's a conscious choice and it's a choice that so far as resulted in not in any meaningful growth but only these asset bubbles so one point the politicians need to say we made the wrong choice we make another choice where i think the point is now i think they should stop this policy right away and stop. these this manipulation of markets are doubling down during creasing quantitative easing their amplifying their mistakes i think that's absolutely correct i think the central banks painted themselves into a corner now because they don't dare stop this kind of policy and druggy has even hinted negative or into it so that over there it is the b. which is the central saver is the bundesbank i mean they're being sucked in to this

this idea totally against the d.n.a. of their german central banker they're now going to expand the e.c.b. the balance sheet by trillions of your of to compete with the u.s. in the u.k. the german people they must be outraged at this because they're likely going to watch they're going to be right back into hyper inflationary scenario right ultimately this could very well lead into a hive of inflation or scenario no strangely right now i think it's causing bubbles in germany and i think what we see right now is something that be saw the flip side of back in two thousand and three to two thousand and five when the interest rates were also very low to help our germany at the time and that helped to build all these bubbles in southern europe in particular you know that we did state market in spain where now is the reverse now we have even lower interest rates to help southern europe and now we see you know germany now on paper looks better than it really is fundamentally and in terms of its underlying economics we see right now germans lowering the savings rate we see germans entering the real estate market we have a real estate boom in germany so if this all continues we will see new bubbles pop

up somewhere else i think if you step back that there's only one we have to keep in mind your consumption ultimately has to be backed by production and investing is ultimately to be backed by saving you can disengage these components for some time but just printing money expanding credit of your money creation and leverage and this is what we did you know again and again most recently up to two thousand and seven two thousand and eight and we're trying to do that again and this will only lead again for the two bubbles which will pop at some stage when we go into another financial crisis or. at some point this policy will undermine the confidence in money and then you do get a higher velocity of money you do get inflation and then we're really in a mess ok so one of the price signals people look for to see whether or not the central banks are making a mistake or not would be the price of gold yes now gold in this recent news cycle has actually trade down on the news there was a bit of

a flash crash in gold they fell suddenly in april. so this is being pointed to by those that are on the side of the paper pushers as i call them as vindication that they're correct then on the other side of the coin you have folks that are pointing out that while gold like whether it's live bore or whether it's by masters in the oil of energy markets it's manipulated and it's giving a false price signal there scarcity of gold what's going on the gold in relation to all this whether the president manipulator or not it's difficult to say so i don't want to even enter that discussion i take it at fast face value so i think if you look at it is there a reason why the gold price is trading down and i think we can find these reasons in the you know these short term reasons i think what's happening is that so far the policy of all this money printing has not led to a substantial rise in consumer price inflation which is really what most people look at just reading again to inflation and surprises but not in consumer prices so

this is something i think the holders of gold some of them getting nervous you know this is not leading to the inflationary impact that many of them expected and secondly i think the central bank us enjoying enjoying a little bit of a sweet spot right now in the markets in the sense that the money they're creating is leading to these. price appreciations and that sucks more people again into the equity market and i think a lot of investors find it difficult to sit on gold when sort of the equity market is rallying and even the bond market is rallying or financial assets are going up so i think we have these phenomena in inflation. really contained right now because the economy's not really picking up financial assets a booming again and so people feel that gold is a little bit of a dead weight in their portfolio i don't think this will last because as we said before. this policy is doesn't doesn't get us out of out of all problems it will create new problems as we go along right well they say one thing about gold but

then when trouble begins then they have a different attitude toward gold so during the cyprus bail and it was suggested that cyprus sell their gold reserves to secure a loan now it's being suggested that italy issue gold backed bonds to monetize their gold essentially so gold during the course of this crisis period is inching toward something called an international reserve currency is being used how high banks to square the books on some of these countries like italy and cyprus and others so it is it is a case where it's you know follow what we do but don't follow what we say because behind the scenes it seems gold is now becoming increasingly more important your thoughts. go to becoming more important and will continue to become more important for people simply as a self-defense s. i mean i call it is the essential self defense as the two to protect your own assets and your own wealth from inflation and other for the financial crises and all this manipulation that the discussing here. i think among the officials and

central banks and governments it's not that important because obviously if you look at the balance sheets of the major central banks now you know the leverage of the financial system it's so big that their gold holdings as collateral is almost meaningless i mean the biggest own of gold fishel is obviously the united states and their official gold holdings amount to i think four hundred billion years old and if it is printing that in the course of three or four months yeah i mean let me jump in for a second because less and less countries now their sovereign debt is considered aaa so aaa credits are now in scarce supply as far as collateral goes as far as being able to collateralize the interbank lending schemes are going around to support this multi hundred trillion dollar derivatives market there's very few aaa rated credits now scored gold is something without any current counterparty risk it is actually collateral and we see during market sell off suddenly people dump gold because it's the only thing out there where there's a big only thing that somebody will take in exchange to extinguish a debt or

a derivative gone bust is gold now it's about china for a second g.l.d. which is that e.t.f. trades in new york it's sold two hundred seventy one tons of gold a year to date as part of this sell off now converse league chinese housewives the mythical mrs wang bought three hundred tons in two weeks which is a more important trend here difficult to say i'd probably say neither because you know if one take that's interesting though i would say i would say the reason why i think gold will continue to do well in the medium to long run is simply because it will be discussed earlier that the central banks will. you to print money and that should be a good reason for the chinese weather domestic oficial to buy more gold and should be a strong reason the medium to long term for those investors in the in the gold e.t.f. stude to continue to buy gold so in a way i think these are well which group of investors is currently buying or selling gold i think these are short term tactical factors that i think in the long

term do not make much of a difference for the altar of the gold market i will say one more thing about cyprus and the central bank selling gold or using it a collapse as collateral i think what we could see in some of these cases is that the selling it like you know the family sofa just liquidating it because they are insolvent or close to getting insolvent so the need to liquidate assets again in the short term this could be a damp an effect on the gold price in the long run none of these factors are material the key factor is that paper money is continued to be used as a political tool to keep you know overstretch financial system going and ultimately that's going to debase money ok so not much faith and mrs wang. well got kind of off their raw time thanks so much for being on the kaiser thanks for having me thank you. and that's going to do it for this edition of the kaiser report was made back to kaiser stacy herbert i guessed that last schlichter if you'd like to send us an email please just eyes are reported r t t v dot ru until next i'm asked how they're saying by all.

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